Monday, April 11, 2011

Freeport's (FCX) Copper Sales Pressured on Ore Quality

The declining quality of ore at its giant Grasberg mine in Indonesia is having a significant impact on the prior estimates of copper output Freeport-McMoran (NYSE:FCX) was expecting there.

As a result, Freeport has lowered its production estimates there by 17 percent for 2011.

Another pressure Freeport and others with strong exposure to copper face is if the price goes to high the strong possibility that aluminum will be substituted in its place, with a price of $3.5 a pound for copper appearing to be the upper end of its viability in reference to sustainability.

If prices remain under that apparent ceiling, Freeport competitors like Newmont Mining (NYSE:NEM), Southern Copper (NYSE:SCCO) and Codelco could benefit.

Freeport was trading at $56.35, falling $0.88, or 1.54 percent, as of 2:15 PM EDT.

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